A Guide to Third-Party Logistics
From warehousing, inventory management, and order fulfillment centers, third-party logistics processes is at the heart of the supply chain. For companies that rely on these logistics businesses, the receiving, storing, and shipping of inventory are crucial components to their growth—especially when supply chain management can be complicated.
With the specialization of logistics functions becoming a necessity for many organizations, especially with the rise of ecommerce and omnichannel fulfilled network, the outsourcing of these specific responsibilities has fallen to third-party warehouse businesses called 3PLs, or third-party logistics warehouses.
But what exactly is a 3PL? What do they do? And what are the reasons for hiring one?
What is 3PL Warehouse?
A third-party logistics warehouse, or 3PL for short, is an outsourced business that takes care of a company’s supply chain and logistics operations. Simply put, 3PLs are used for the outsourcing of third-party warehouse and distribution needs for their customer’s inventory and fulfillment services.
3PL warehouses manage 3PL stock, hold, and ship the inventory of multiple businesses or other businesses in addition to their own inventory. If they fulfill and store orders for both their own business as well as their clients, they are what’s known as a hybrid 3PL.
Many have 3PLs have fulfillment specialties or sub-types denoting a specific vertical or industry. These include, but are not limited to:
- B2B
- Ecommerce
- Retail
- Apparel
- Raw Materials
- Bulk Goods
- Nutraceuticals
- Wines & Spirits
What a 3PL is Not?
Private warehouses, or warehouses that only fulfill orders of their own products, are not considered 3PLs. These types of warehouses are usually owned and managed by manufacturers or retail stores. They use specific accounting, billing, and shipping software that often does not allow for the flexibility needed to manage inventory and billing for multiple customers. If a private warehouse is looking to monetize additional warehouse space, they will likely need to invest in a warehouse management system (WMS) designed for 3PLs.
What Are the Responsibilities of a 3PL?
- Scheduling and executing the receiving of inventory to the warehouse
- Sorting, managing, and accounting for all inventory
- Maintaining inventory in proper conditions
- Negotiating discounted shipping rates
- Picking, packing, and shipping products Kiting and assembling products if necessary
- Managing recurring subscription boxes
Regulatory Navigation
Another reason businesses opt to hire a third-party warehouse is because of the type of inventory the business carries. Certain types of products are controlled with many rules and regulations surrounding, and unless the facility is built to accommodate these regulations, the inventory and company selling it, can be in serious jeopardy. Some products that have regulations around their storage include cold storage, hazmat, nutraceuticals, wine and spirits, and more.
Industry Expertise
3PLs offer a wide array of expertise that cannot be obtained without the proper connections from years of industry experience. They are able to combine a number of 3PL services all in one offering—all under one roof. Things like negotiating lower shipping rates, picking and packing efficiency, or materials management are areas of expertise for a 3PL business. In most cases, they are much more likely to do it better and more cost-effective than a business trying to do it on their own.